Understand financial markets and the financial system and their role in the economy

Appreciate the role of financial managers and the concept of value

Apply techniques for effective investment decision making

Understand risk and portfolio theory

Appreciate issues in raising long and short term finance

Assessing and determining Working capital requirements

Implement dividend policies for the organisation

Understand mergers and acquisitions

Appreciate foreign exchange mechanism and risk

Course Content

The Financial World
The objective of the firm
Ownership and control
Primitive and modern economies
The role of the financial manager
The flow of funds and financial intermediation
Growth in the financial services sector
The financial system

Project Appraisal: Cash Flow and Applications
Quality of information
Are profit calculations useful for estimating project viability?
The replacement decision
Replacement cycles
When to introduce a new machine
Drawbacks of the annual equivalent annuity method
Timing of projects
The make or buy decision
Fluctuating output

The Decision- Making Process for Investment Appraisal
Evidence on the employment of appraisal techniques
Payback
Accounting rate of return
Internal rate of return: reasons for continued popularity
The 'science' and the 'art' of investment appraisal
The investment process

Risk and Project Appraisal
What is risk?
Adjusting for risk through the discount rate
Sensitivity analysis
Scenario analysis
Probability analysis
The risk of insolvency
Problems of using probability analysis
Evidence of risk analysis in practice

Portfolio Theory
Holding period returns
Expected returns and standard deviation for shares
Combinations of investments
Portfolio expected returns and standard deviation
Dominance and the efficient frontier
Indifference curves
Choosing the optimal portfolio
The boundaries of diversification
Extension to a large number of securities
Evidence on the benefits of diversification
The capital market line
A practical application of portfolio theory
Problems with portfolio theory

The Capital Asset Pricing Model and Multi Factor Models
A short history of shares, bonds and bills
The capital asset pricing model
Factor models
The arbitrage pricing theory
The three-factor model
An alternative approach to the risk-return relationship
Project appraisal and systematic risk
Sceptic's views-Alternative perspectives of risk

Stock Markets
Stock exchanges around the world
Globalisation of financial flows
The importance of a well-run stock exchange
The London Stock Exchange
The UK equity markets available to companies
Tasks for stock exchanges
Trading systems
The ownership of UK quoted shares
Regulation
Understanding the figures in the financial pages
Taxation and corporate finance

Raising Equity Capital
What is equity capital?
Preference shares
Some unusual types of shares
Floating on the Official List
Methods of issue
Timetable for a new offer
How does an AIM flotation differ from one on the Official List?
The costs of new issues
Rights issues
Other equity issues
Scrip issues
Warrants
Equity finance for unquoted firms

Stock Market Efficiency
What is meant by efficiency?
Random walks
The three levels of efficiency
Weak-form tests
Semi-strong form tests
Strong-form tests
Behavioural finance
Misconception about the efficient market hypothesis
Implications of the EMH for investors
Implications of the EMH for companies

Managing a Value-Based Company and The Cost of Capital
An overview of the application of the value principles
Measuring value creation: internal metrics
The cost of capital
Empirical evidence of corporate practice
Implementation issues
Fundamental beta
Some thoughts on the costs of capital

Capital Structure
What do we mean by 'gearing'?
The effect of gearing
The value of the firm and the cost of capital
Does the cost of capital (WACC) decrease with higher debt levels?
Modigliani and Miller's argument in a world with no taxes
The capital structure decision in a world with tax
Additional considerations
Some further thoughts on debt finance

Dividend Policy
Defining the problem
Modigliani and Miller's dividend irrelevancy proposition
Dividends as a residual
Clientele effects
Taxation
Dividends as conveyors of information
Resolution of uncertainty
Owner control (agency theory)
Scrip dividends
Share buy-backs and special dividends
A round-up of the arguments